Money laundering can show up in onboarding flows, payout systems, and transaction logs. It hides behind shell companies, vague job titles, and confusing payment patterns. Anti-Money Laundering (AML) checks are how you stop your product from getting involved in these kinds of schemes. Below, we’ll explain what goes into AML checks, what risks to look out for, and how to build a system that scales.

What’s in this article?

• What is an AML check?
  
• Why are AML checks required?
  
• How does the AML process work, step by step?
  
• What are the main AML requirements for businesses?
  
• What are the biggest Anti-Money Laundering risks in digital payments?
  
• How Stripe Financial Connections can help
  

What is an AML check?

An AML check is a process businesses use to verify their customers’ identities, and ensure that customers are not moving illicit funds. It’s the first line of defense in a broader compliance system built to detect and prevent money laundering, terrorism financing, and financial fraud.

At a minimum, this involves collecting and verifying basic information for individuals (e.g., name, date of birth, address, government-issued ID) and businesses (e.g., legal registration, ownership structure, authorized representatives).

Customers are also screened for:

• Any appearance on sanctions lists from relevant authorities, such as the US Office of Foreign Assets Control (OFAC) and the United Nations (UN)
  
• Classification as politically exposed persons (PEPs)
  
• Any negative press—known as adverse media—or high-risk geographies
  

Depending on the risk, you might also need to understand where the customer’s money is coming from and why, especially for intricate business structures or buyers operating in higher-risk sectors.

Why are AML checks required?

AML checks are required because they prevent money laundering and terrorist financing. There are significant and expensive consequences for businesses that fail to follow AML requirements.

Globally, governments have built aggressive AML regimes to keep criminal funds out of the financial system. More than 200 jurisdictions have committed to matching international standards set by the Financial Action Task Force (FATF). If your business moves money, you’re expected to follow these rules or face fines, audits, and possibly criminal liability.

Regulators have a particular interest in fintechs, cryptocurrency platforms, payment service providers, and gambling businesses. For example, in 2023, an Australian gambling company was fined 450 million Australian dollars (AUD) for violating AML legislation.

AML checks also protect:

• Your business: Strong onboarding and transaction monitoring stops fraud early and prevents you from being exploited by bad actors.
  
• Your partners: Banks and payment processors can offboard you if you fall short of compliance obligations.
  
• Your product: If your platform becomes known as a weak link, you can lose customer confidence.
  
• The system at large: Laundered money funds trafficking, terrorism, corruption, and organized crime. AML compliance cuts off the flow at the source.
  
• Your reputation: No customer or investor wants to see your company name in the same sentence as “laundering ring” or “sanctions evasion.”
  

How does the AML process work, step by step?

AML is a structured series of checks that businesses use to catch risk early and maintain vigilance over time. Here’s how it works in practice.

Verify identity

Gather basic information about the individuals or businesses involved in order to run Know Your Customer (KYC) checks. Screen for sanctions and PEP status. If someone’s on a prohibited list or linked to political exposure or adverse media, the system will flag it.

If the individual or business fails the screen, you stop there and do not proceed with the sale. If they pass, you move on to the next step.

Assess customer risk

Next, find out how risky the individual or business is. This is called Customer Due Diligence (CDD).

You’ll find out:

• Their business type
  
• Where they’re located
  
• How they’ll use your product or service
  
• Where their money is coming from
  

Dig deeper for high-risk profiles

If a customer is flagged as higher-risk based on geography, industry, ownership complexity, or behavior, you conduct Enhanced Due Diligence (EDD).

This might include:

• Verifying the source (or sources) of funds or wealth
  
• Collecting references or financial statements
  
• Reviewing adverse media
  
• Getting senior management sign-off before proceeding
  

Monitor behavior continuously

Monitoring doesn’t stop once the customer is onboarded. Rule-based systems and AI models flag any deviations in transactions. Compliance teams review alerts and escalate anything that seems suspicious.

Watch for:

• Spikes in transaction volume
  
• Unusual routing patterns
  
• Transfers to high-risk jurisdictions
  
• Structuring (i.e., breaking up large transactions to avoid detection)
  

Report suspicious activity

If something looks off and can’t be explained, you should report it without tipping off the customer. You also need to keep records, usually for at least five years.

Inform the relevant authority, which will depend on the country your business is based in.

• The US: The Financial Crimes Enforcement Network (FinCEN)
  
• The UK: The National Crime Agency (NCA)
  
• The EU and elsewhere: Local financial intelligence units
  

What are the main AML requirements for businesses?

If you move money, you need an AML program. That’s true if you’re a bank, a marketplace, a crypto platform, or a startup that handles payments. The exact requirements vary by country, but regulators generally ask for the same core standards.

On top of the tasks needed for AML checks, such as knowing who you’re working with, measuring risk, monitoring customers after onboarding, and keeping accessible records, there are a few more actions you should prioritize.

Appoint someone to lead AML efforts

You need to designate someone who will be responsible for AML compliance, often called a Money Laundering Reporting Officer (MLRO). This person should have enough authority to escalate issues and make decisions.

Train your team

All employees involved in onboarding, support, operations, or product should know how to spot suspicious behavior and what to do next. This training should be documented, and applies to both new hires and long-time employees.

Review and update regularly

Regulators expect you to review the AML program every year, audit it, and update it as your product, market, or risks evolve.

That’s the baseline. You can build from there depending on your business model, markets, and partners. But if any of this is missing, you’re exposed legally, financially, and in your daily business operations.

What are the biggest Anti-Money Laundering risks in digital payments?

The faster and more global payments become, the more attractive they are to bad actors trying to launder money. Here’s where AML risk shows up most often in digital-first systems, and what makes it harder to catch.

Real-time payments leave no margin for error

Money moves fast. In some systems, it’s instant. That’s great for users but harder for compliance teams. Once funds are out the door, you can’t get them back, which means your checks need to happen beforehand or in real time.

Fraud and laundering overlap

Some fraud attempts are more subtle than outright stealing, including the placing or layering of funds, which is typical money-laundering behavior. This can show up as account takeovers used to reroute cash or synthetic identities used to open dozens of accounts. The fraud team might spot a fraud attempt first, but if you’re not looking at behavioral anomalies through a laundering lens, you might miss the broader pattern.

Structured transactions are harder to spot at scale

Digital platforms process thousands, sometimes millions, of small transactions per day. That volume gives cover to money launderers who break large transfers into smaller ones to avoid detection—a tactic known as structuring. Without smart alert thresholds and cross-pattern detection, these transactions can slip through.

Regulatory fragmentation creates weak spots

Digital payment companies often operate across multiple countries. AML rules can vary from country to country, and criminals learn where enforcement is weaker. If your controls vary by market or partner, they’ll find the gaps. This is why many digital-first companies choose to meet the strictest requirements across the board, rather than tailoring to the lowest local standard.

Crypto adds another layer

Even if you don’t offer crypto directly, your users might interact with it elsewhere in your system. Blockchain transfers can be fast, cross-border, and initiated under a false name. You’ll need to know how to flag high-risk wallet addresses, trace asset origin, and respond quickly if funds enter your system from a source tied to illicit activity.

Sanctions violations can happen unnoticed

If your system lets users send or receive funds from sanctioned countries or entities—even unknowingly—you can be held liable. This is why payer and payee screening matters.

The risk doesn’t always look like risk

Sometimes, money laundering looks like a normal user sending a rent payment every month or a personal account that’s suddenly being used like a business account. The challenge in digital payments is that the behavior often passes surface-level checks. You need systems that can catch patterns across time, accounts, and transactions, as well as within them.

How Stripe Financial Connections can help

Stripe Financial Connections is a set of application programming interfaces (APIs) that allows you to securely connect to your customers’ bank accounts and retrieve their financial data, enabling you to assess their risk quickly.

Financial Connections can help you:

• Simplify onboarding: Offer a seamless, instant bank account verification process that does not require manual identity and account verification.
  
• Access rich financial data: Retrieve comprehensive information about your customers’ bank accounts, including balances, transactions, and account details.
  
• Automate recurring payments: Enable your customers to securely link their bank accounts for recurring payments, improving payment success rates.
  
• Enhance risk management: Analyze customers’ financial data to make more informed decisions about credit, lending, and other financial products.
  
• Comply with regulations: Meet KYC and AML requirements.
  
• Innovate with confidence: Build new financial products and services on top of the secure, reliable Financial Connections infrastructure.
  

Learn more about Financial Connections, or get started today.